Industry groups rejects Employment Insurance Scheme (Updated)

KUALA LUMPUR: Over 90 organisations have objected to the establishment of the Employment Insurance Scheme (EIS), which was proposed by the Human Resources Ministry.
Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan said there are flaws in the proposed scheme which is detrimental to both employees and employers.
"The scheme might encourage irresponsible employers to forgo paying retrenchment benefits because they know their employees will be taken care of by other employees and responsible employers," Shamsuddin said during a joint media conference on the scheme.
Shamsuddin explained that the proposed scheme was meant to assist the retrenched workers by providing temporary financial assistance and reskilling and upskilling opportunities to the group.
"And under the scheme, employers and employees are required to contribute an equal percentage of employees' salaries (0.25% by employers and 0.25% by employees) to a common pool that is managed by Sosco.
"However, retrenchment does not occur every year, if the scheme is implemented, both employees and employers would have to contribute to it every year," he added.
He then revealed that even during the height of the Asian Financial crisis 1997-98, the number of employees retrenched was only about 0.6% of the total workforce and of all the retrenched employees, 95% received their termination benefits while only 5% were left in the lurch.
Shamsuddin stressed that there is no need for the EIS as the current system of paying termination and lay-off benefits under the law and payment of retrenchment benefits under collective agreements is effective enough.
Other flaws with the proposal is that the scheme might dwell into Active Labour Market Policies (ALMPs) which involve job seeking, job matching, job placement, career counselling, and job training/ upskilling/ reskilling, which is the responsibility of the government.
"Employees and employers should not be made to pay and contribute to the EIS whereby part of the fund would be used for the functioning of the ALMPs," he said.